Intrinsic value of Allegiant Travel Company - ALGT

Previous Close

$144.26

  Intrinsic Value

$270.44

stock screener

  Rating & Target

str. buy

+87%

Previous close

$144.26

 
Intrinsic value

$270.44

 
Up/down potential

+87%

 
Rating

str. buy

We calculate the intrinsic value of ALGT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  1,812
  1,963
  2,120
  2,283
  2,453
  2,629
  2,812
  3,002
  3,200
  3,406
  3,621
  3,844
  4,076
  4,318
  4,571
  4,834
  5,109
  5,396
  5,695
  6,009
  6,336
  6,679
  7,037
  7,412
  7,804
  8,215
  8,646
  9,096
  9,569
  10,064
Variable operating expenses, $m
  1,521
  1,632
  1,748
  1,868
  1,993
  2,123
  2,258
  2,398
  2,544
  2,696
  2,669
  2,834
  3,005
  3,183
  3,369
  3,564
  3,766
  3,978
  4,199
  4,430
  4,671
  4,923
  5,188
  5,464
  5,753
  6,056
  6,374
  6,706
  7,054
  7,419
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,521
  1,632
  1,748
  1,868
  1,993
  2,123
  2,258
  2,398
  2,544
  2,696
  2,669
  2,834
  3,005
  3,183
  3,369
  3,564
  3,766
  3,978
  4,199
  4,430
  4,671
  4,923
  5,188
  5,464
  5,753
  6,056
  6,374
  6,706
  7,054
  7,419
Operating income, $m
  291
  331
  372
  415
  460
  506
  554
  604
  656
  710
  951
  1,010
  1,071
  1,135
  1,201
  1,270
  1,343
  1,418
  1,497
  1,579
  1,665
  1,755
  1,849
  1,948
  2,051
  2,159
  2,272
  2,391
  2,515
  2,645
EBITDA, $m
  617
  668
  721
  777
  835
  895
  957
  1,022
  1,089
  1,159
  1,232
  1,308
  1,387
  1,470
  1,556
  1,645
  1,739
  1,836
  1,938
  2,045
  2,156
  2,273
  2,395
  2,522
  2,656
  2,796
  2,942
  3,096
  3,257
  3,425
Interest expense (income), $m
  22
  69
  77
  86
  95
  104
  113
  124
  134
  145
  156
  168
  180
  193
  206
  220
  234
  249
  265
  281
  298
  316
  335
  354
  375
  396
  419
  442
  467
  492
  519
Earnings before tax, $m
  223
  254
  287
  321
  356
  393
  431
  470
  512
  554
  784
  830
  878
  929
  981
  1,036
  1,093
  1,153
  1,215
  1,281
  1,349
  1,420
  1,495
  1,573
  1,655
  1,740
  1,830
  1,924
  2,022
  2,126
Tax expense, $m
  60
  69
  77
  87
  96
  106
  116
  127
  138
  150
  212
  224
  237
  251
  265
  280
  295
  311
  328
  346
  364
  383
  404
  425
  447
  470
  494
  519
  546
  574
Net income, $m
  163
  186
  209
  234
  260
  287
  314
  343
  373
  405
  572
  606
  641
  678
  716
  756
  798
  842
  887
  935
  985
  1,037
  1,091
  1,148
  1,208
  1,270
  1,336
  1,404
  1,476
  1,552

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,665
  2,887
  3,118
  3,358
  3,607
  3,866
  4,135
  4,415
  4,706
  5,009
  5,324
  5,652
  5,994
  6,350
  6,721
  7,109
  7,513
  7,935
  8,376
  8,836
  9,318
  9,821
  10,348
  10,900
  11,477
  12,081
  12,714
  13,377
  14,072
  14,800
Adjusted assets (=assets-cash), $m
  2,665
  2,887
  3,118
  3,358
  3,607
  3,866
  4,135
  4,415
  4,706
  5,009
  5,324
  5,652
  5,994
  6,350
  6,721
  7,109
  7,513
  7,935
  8,376
  8,836
  9,318
  9,821
  10,348
  10,900
  11,477
  12,081
  12,714
  13,377
  14,072
  14,800
Revenue / Adjusted assets
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
Average production assets, $m
  1,827
  1,979
  2,137
  2,301
  2,472
  2,650
  2,835
  3,026
  3,226
  3,434
  3,650
  3,874
  4,109
  4,353
  4,607
  4,873
  5,150
  5,439
  5,741
  6,057
  6,387
  6,732
  7,093
  7,471
  7,867
  8,281
  8,715
  9,169
  9,645
  10,145
Working capital, $m
  -301
  -326
  -352
  -379
  -407
  -436
  -467
  -498
  -531
  -565
  -601
  -638
  -677
  -717
  -759
  -802
  -848
  -896
  -945
  -997
  -1,052
  -1,109
  -1,168
  -1,230
  -1,296
  -1,364
  -1,435
  -1,510
  -1,588
  -1,671
Total debt, $m
  1,425
  1,585
  1,750
  1,923
  2,102
  2,288
  2,481
  2,682
  2,891
  3,109
  3,335
  3,570
  3,816
  4,071
  4,338
  4,616
  4,906
  5,209
  5,526
  5,856
  6,202
  6,564
  6,942
  7,338
  7,752
  8,186
  8,641
  9,117
  9,616
  10,138
Total liabilities, $m
  1,913
  2,073
  2,238
  2,411
  2,590
  2,776
  2,969
  3,170
  3,379
  3,597
  3,823
  4,058
  4,304
  4,559
  4,826
  5,104
  5,394
  5,697
  6,014
  6,344
  6,690
  7,052
  7,430
  7,826
  8,240
  8,674
  9,129
  9,605
  10,104
  10,626
Total equity, $m
  751
  814
  879
  947
  1,017
  1,090
  1,166
  1,245
  1,327
  1,413
  1,501
  1,594
  1,690
  1,791
  1,895
  2,005
  2,119
  2,238
  2,362
  2,492
  2,628
  2,770
  2,918
  3,074
  3,236
  3,407
  3,585
  3,772
  3,968
  4,174
Total liabilities and equity, $m
  2,664
  2,887
  3,117
  3,358
  3,607
  3,866
  4,135
  4,415
  4,706
  5,010
  5,324
  5,652
  5,994
  6,350
  6,721
  7,109
  7,513
  7,935
  8,376
  8,836
  9,318
  9,822
  10,348
  10,900
  11,476
  12,081
  12,714
  13,377
  14,072
  14,800
Debt-to-equity ratio
  1.900
  1.950
  1.990
  2.030
  2.070
  2.100
  2.130
  2.150
  2.180
  2.200
  2.220
  2.240
  2.260
  2.270
  2.290
  2.300
  2.320
  2.330
  2.340
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.400
  2.410
  2.420
  2.420
  2.430
Adjusted equity ratio
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  163
  186
  209
  234
  260
  287
  314
  343
  373
  405
  572
  606
  641
  678
  716
  756
  798
  842
  887
  935
  985
  1,037
  1,091
  1,148
  1,208
  1,270
  1,336
  1,404
  1,476
  1,552
Depreciation, amort., depletion, $m
  325
  337
  349
  362
  375
  389
  403
  418
  433
  449
  281
  298
  316
  335
  354
  375
  396
  418
  442
  466
  491
  518
  546
  575
  605
  637
  670
  705
  742
  780
Funds from operations, $m
  488
  522
  558
  596
  635
  675
  717
  761
  806
  853
  853
  904
  957
  1,013
  1,071
  1,131
  1,194
  1,260
  1,329
  1,401
  1,476
  1,555
  1,637
  1,723
  1,813
  1,907
  2,006
  2,110
  2,218
  2,332
Change in working capital, $m
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
Cash from operations, $m
  512
  548
  585
  623
  663
  704
  748
  792
  839
  888
  888
  941
  996
  1,053
  1,113
  1,175
  1,240
  1,308
  1,379
  1,453
  1,530
  1,611
  1,696
  1,785
  1,878
  1,976
  2,078
  2,185
  2,297
  2,414
Maintenance CAPEX, $m
  -129
  -141
  -152
  -164
  -177
  -190
  -204
  -218
  -233
  -248
  -264
  -281
  -298
  -316
  -335
  -354
  -375
  -396
  -418
  -442
  -466
  -491
  -518
  -546
  -575
  -605
  -637
  -670
  -705
  -742
New CAPEX, $m
  -147
  -152
  -158
  -164
  -171
  -178
  -185
  -192
  -200
  -208
  -216
  -225
  -234
  -244
  -254
  -265
  -277
  -289
  -302
  -316
  -330
  -345
  -361
  -378
  -396
  -414
  -434
  -454
  -476
  -499
Cash from investing activities, $m
  -276
  -293
  -310
  -328
  -348
  -368
  -389
  -410
  -433
  -456
  -480
  -506
  -532
  -560
  -589
  -619
  -652
  -685
  -720
  -758
  -796
  -836
  -879
  -924
  -971
  -1,019
  -1,071
  -1,124
  -1,181
  -1,241
Free cash flow, $m
  236
  255
  274
  294
  315
  337
  359
  383
  407
  432
  408
  435
  464
  493
  523
  555
  588
  622
  658
  695
  734
  775
  817
  862
  908
  956
  1,007
  1,060
  1,115
  1,173
Issuance/(repayment) of debt, $m
  154
  159
  166
  172
  179
  186
  193
  201
  209
  217
  226
  236
  245
  256
  267
  278
  290
  303
  316
  331
  346
  362
  378
  396
  414
  434
  454
  476
  499
  523
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  154
  159
  166
  172
  179
  186
  193
  201
  209
  217
  226
  236
  245
  256
  267
  278
  290
  303
  316
  331
  346
  362
  378
  396
  414
  434
  454
  476
  499
  523
Total cash flow (excl. dividends), $m
  390
  414
  440
  466
  494
  523
  553
  584
  616
  649
  634
  671
  709
  749
  790
  833
  878
  925
  975
  1,026
  1,080
  1,137
  1,196
  1,257
  1,322
  1,390
  1,461
  1,536
  1,614
  1,696
Retained Cash Flow (-), $m
  -61
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -93
  -96
  -100
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -149
  -155
  -163
  -170
  -178
  -187
  -196
  -205
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  329
  352
  375
  399
  424
  450
  477
  505
  534
  564
  546
  578
  613
  648
  685
  724
  764
  806
  850
  896
  944
  995
  1,047
  1,102
  1,160
  1,220
  1,283
  1,349
  1,418
  1,491
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  311
  313
  312
  309
  303
  295
  285
  272
  258
  242
  205
  189
  173
  155
  138
  121
  104
  88
  74
  61
  49
  39
  30
  23
  17
  12
  9
  6
  4
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Allegiant Travel Company is a leisure travel company. The Company is focused on providing travel services and products to residents of under-served cities in the United States. It also provides air transportation under fixed fee flying arrangements. The Company's products and services include scheduled service air transportation, air-related ancillary products and services, third-party ancillary products and services and fixed fee contract air transportation. Its scheduled service air transportation includes scheduled air transportation on limited-frequency non-stop flights between under-served cities and leisure destinations. As of February 1, 2017, its operating fleet consisted of 47 MD-80 aircraft, 34 Airbus A320 series aircraft, and four Boeing 757-200 aircraft, and it was selling travel on 377 routes to 119 cities. The Company's air-related ancillary products and services include providing unbundled air-related services and products in conjunction with air transportation.

FINANCIAL RATIOS  of  Allegiant Travel Company (ALGT)

Valuation Ratios
P/E Ratio 10.9
Price to Sales 1.8
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 16.3
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20.9%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 152.3%
Total Debt to Equity 170.5%
Interest Coverage 17
Management Effectiveness
Return On Assets 15.4%
Ret/ On Assets - 3 Yr. Avg. 14.2%
Return On Total Capital 19.3%
Ret/ On T. Cap. - 3 Yr. Avg. 18.2%
Return On Equity 53.4%
Return On Equity - 3 Yr. Avg. 49.3%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 73.3%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin 34.7%
EBITDA Margin - 3 Yr. Avg. 31%
Operating Margin 27.2%
Oper. Margin - 3 Yr. Avg. 23.5%
Pre-Tax Margin 25.4%
Pre-Tax Margin - 3 Yr. Avg. 21.6%
Net Profit Margin 16.1%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 30.9%

ALGT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALGT stock intrinsic value calculation we used $1667 million for the last fiscal year's total revenue generated by Allegiant Travel Company. The default revenue input number comes from 0001 income statement of Allegiant Travel Company. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ALGT stock valuation model: a) initial revenue growth rate of 8.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.7%, whose default value for ALGT is calculated based on our internal credit rating of Allegiant Travel Company, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Allegiant Travel Company.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ALGT stock the variable cost ratio is equal to 84.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ALGT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Allegiant Travel Company.

Corporate tax rate of 27% is the nominal tax rate for Allegiant Travel Company. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ALGT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ALGT are equal to 100.8%.

Life of production assets of 13 years is the average useful life of capital assets used in Allegiant Travel Company operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ALGT is equal to -16.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $690.321 million for Allegiant Travel Company - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 16.284 million for Allegiant Travel Company is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Allegiant Travel Company at the current share price and the inputted number of shares is $2.3 billion.

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